Karen Wright, KDW Consulting Services Inc. discusses good record-keeping for better decision-making
When taking a trip, travelers consult a map or GPS for directions. When dining at a restaurant, patrons consult a menu before ordering their meals. When grocery shopping, consumers often make lists to make sure they get all that they need. Preparing in advance helps make good decisions, whether traveling, shopping or running a farm or ranch.
It’s just common sense to keep good records, according to Karen Wright, KDW Consulting Services Inc., who discussed the value of good record-keeping in an agriculture business. Taking a look at the time-saving and efficiency benefits of accurate records, Wright stressed the importance of maintaining a variety of records to provide valuable information for future decision-making in the operation. Wright noted that with effective record-keeping, ranch families gain a sense of direction, peace of mind and validation needed to make sound business decisions.
“Having good records with supporting documents can be very beneficial for a multitude of reasons,” said Wright. “Through the use of computer software, you can have quick access to information for the use of taxes, an audit or other government requirements. Good records save time, too, as you can quickly generate and share reports with accountants, business partners or lenders. If you keep your records up-to-date, you have enhanced efficiency, and it’s pretty satisfying, too.”
Looking at the basics, ranchers should maintain an income and expense report to make comparisons from year-to-year. Other records to keep track of include: loan reports, average sale price reports, cost-of-production reports, efficiency reports, financial ratios and payroll records.
“Every financial record starts with a piece of paper,” she said. “Do you know where those papers are? Unpaid bills, receipts and other transactions need to be kept in a certain place. It should be simple and efficient, and whoever is in the partnership should be on the same page where documents should be filed. Organize financial information with twelve file folders, one for each month. Make an income folder, and make another one for expenses and credit cards.”
Wright stressed the importance of capturing the data while it’s fresh; don’t let paperwork pile up.
“File records promptly; it works!” she added. “Use financial management software and keep books up-to-date to be able to generate reports for future decision-making. If files aren’t current, you can’t generate these reports to make big decisions. Bookwork may not have a high value to you, or you may be too busy, but we must make time for it.”
The benefits, she added, are worth the investment in time.
“From good record keeping, you gain a sense of direction,” she said. “There are so many things in agriculture we can’t control. We can’t control the weather or the markets. We can do our best to control input costs, but those things are sometimes out of our control, too. What we can take good control of is our financial management. Invest your time to keep up-to-date records. You’ll quickly gain peace of mind, personal validation and positive business relationships.”
Additionally, accurate records can result in cost savings, as it helps to stay ahead of the game when making purchases and financial decisions within the business.
“Typically, with good record keeping, we can save money by reducing our accounting fees,” she explained. “We can also take advantage of early bill payment to save interest fees. The opportunity to analyze cash flow is also a benefit of having current financial records. We know where we stand and can better understand the flow of our business to stay ahead of things.”
Wright said she commits to one day each week to filing records and updating her reports.
“What we put into it is what we get out of it,” she said. “Keep your files in a visual place where you will remember to do it. Take the time to track things out and reap the benefits.”
As ranchers get busy with calving season, followed by planting, the stack of paperwork can quickly pile up. Wright recommended ranchers take the time, whether it’s once per week or once per month to track, file and maintain up-to-date records. The success of a business depends on it.